Two weeks ago, I attended a talk organised by the Credit Bureau Singapore (CBS) on Understanding Your Enhanced Credit Report. The bureau representative went though the information shown in a Credit Report and how to improve your credit rating.
Why are Credit Reports Important?
Your credit report is a record of your credit payment history compiled from banks and major financial institutions. CBS supplements it with publicly available information such as bankruptcy data from the Insolvency and Public Trustee's Office (IPTO).
Lenders typically check your credit file to assess your credit worthiness prior to making a decision to provide credit or giving out loans. They usually look out for the repayment status of credit facilities, credit repayment history, any default / bankruptcy information, number of existing credit facilities, new enquiries, outstanding balances and overdue balances in the credit report to assess your credit worthiness.
Also, the credit report has now become crucial for financial institutions to assess potential borrowers who are interested to take up home loans as they have to comply with the minimum Total Debt Servicing Ratio (TDSR) set by Monetary Authority of Singapore (MAS) of 60%. Please refer to the full details on the new property cooling measures and rules
here.
CBS does not play a part in the lending approval decision. The lending decision is solely at the discretion of the lenders after applying different criteria to evaluate a consumer's credit worthiness.
What Information is Displayed in a Credit Report?
There is usually a 1 to 2-month time lag in the information presented in a credit report as the banks need time to submit information to the credit bureau for aggregation and compilation.
A Credit Report typically includes a Summary of your personal credit facilities and aggregate credit limits, Account Status History, Previous Enquiries, Default Records, Bankruptcy Proceedings, Debt Repayment Scheme (DRS), Narratives, Credit Score, Aggregate Outstanding Balances.
Information remains on a credit report for varying lengths of time depending on its relative importance in the credit-worthiness assessment. For example, Aggregate Outstanding Balances are retained for 6 months while Bankruptcy Proceedings remain for 5 years from date of discharge.
What is a Credit Score?
A Credit Score is a number used by lenders as an indicator of the likelihood of debt repayment and the probability of going into default. The score ranges from 1000 to 2000, where individuals scoring 1000 with the highest likelihood of defaulting on a repayment, whereas those scoring 2000 have the lowest chance of being delinquent.
Factors Affecting Your Credit Score
The 7 main factors affecting your credit score are as follows: Utilization Pattern, Recent Credit, Account Delinquency Data, Credit Account History, Available Credit, Enquiry Activity and Excessive Credit.
How Do I Improve My Credit Score?
These are the factors which would assist you to improve your credit score:
1. Paying your bills on time and in full
2. Not having overdue balances
3. Keeping your outstanding debts low or consider charging less
4. Not having bankruptcy and default information in your credit report
5. Limiting the number of credit facilities you own
6. Not applying for lots of credit within a short period of time
A Complimentary Copy of Your Credit Report
A complimentary copy of your credit report will be provided within 30 days, from the date of your credit application with any CBS members. To obtain your free credit report, kindly request in-person at the CBS office.
How to Obtain Your Credit Report
A paid copy of the report at S$6.40 can be obtained by :
Applying online via www.creditbureau.com.sg with your SingPass ID and Password
Or, applying in person at the following locations:
CBS office at 2 Shenton Way, #20-02, SGX Centre 1
Any SingPost offices island-wide
Crimson Logic Services Bureaus at Chinatown Point #19-01/02 or Supreme Court Building, Level 1
CASE office at #05-01, Ulu Pandan Community Building
Please refer the
website for more details and to sign up for the talk if you are interested.
Current Credit Situation in Singapore
It was reported in the Sunday Times on 14 Dec 2014 that credit cardholders chalked up a whopping $10b in outstanding credit card loans by Xmas. However, two in three customers still pay off debts in full every month. Around 3% of credit cardholders (about 47,000 people) have debts exceeding a year's salary. MAS says that the consumer credit situation in Singapore remains sound as most consumers use their cards prudently as a payment channel rather than as a source of credit. To help people avoid debt problems, MAS is strengthening credit card and unsecured credit rules in 3 ways:
1) Enhanced Credit Assessment
Since June 2013, financial institutions have been required to conduct checks with the credit bureaus and take into account the total credit limits and total outstanding debt balances of a borrower before they can grant him or her a new credit card, a new unsecured credit facility or an increase in credit limit.
2) Measures to Prevent Debt Accumulation
From June 2014, financial institutions will not be allowed to grant additional unsecured credit to a borrower who is 60 days or more past due on any credit card or unsecured credit facility.
In addition, other financial institutions will not be able to increase credit limits or grant new unsecured facilities to this individual.
They will also be prohibited from granting further unsecured credit to a borrower whose outstanding unsecured debt aggregated across all financial institutions exceeds his annual income for three consecutive months or more.
3) Information Disclosure
Also from June 2014, financial institutions will be required to disclose to borrowers who do not pay their bills in full how their debts will accumulate and how long it will take for them to settle their bills fully if they were to pay only the required minimum payment every month.
Conclusion
Hence, it becomes increasingly important for consumers like us to be financial savvy and know what the financial institutions are looking out for, especially if we want to score a loan for our private property.
